Cambridge – DMG

Proposed new acquisitions in the pipeline

Acquisition of 30 Marsiling Industrial Estate Road 8 and 11 Woodlands Walk. The management of Cambridge Industrial Trust (CIT) just announced the proposed acquisition of the properties at 30 Marsiling Industrial Estate Road 8 and 11 Woodlands Walk for a purchase consideration of S$39.0m and S$17.3m respectively. 30 Marsiling is a light industrial building with a GFA of 20,249 sqm. Upon completion of the acquisition, the building will be leased back to BIPL for a period of three years. The second property 11 Woodlands Walk is also a light industrial building with a GFA of approximately 8,977 sqm. Upon completion, the property will be leased to HFB for a period of five years. Given a forecasted annual NPI of S$2.8m for the property at Marsiling and S$1.4m for 11 Woodlands Walk, the yields from these properties are estimated at 7.2% and 7.9% respectively. Maintain BUY on CIT with a DDM-based TP of S$0.660.

Decent land tenure on both properties. According to the announcements, Marsiling Industrial has a land tenure of 30 years commencing from 1st December 1989, with an option to renew for an additional 30 years, while 11 Woodlands Walk has a balance tenure of 43 years. The management further indicated that the acquisition of the Marsiling property will be funded solely via debt facilities. Although no announcements have been made with regards to the method of funding for the property at Woodlands Walk, given the size of this acquisition we speculate that it would similarly be funded via debt and cash.

Property acquired to replace the lost of income as a result of SLA acquisition. Previously, SLA has announced a compulsory acquisition of two of CIT’s properties located in Tuas. Given that these properties will be sold to SLA by January 2013, these new acquisitions are seen as partial replacements to those in Tuas.

More acquisitions to be expected going forward. Since the forecasted NPI from these new properties only accounts for c.5.0% of CIT’s total NPI; while the two properties to be taken over by SLA makes up 11% of total revenue, we believe there will be more acquisitions going forward as management strive to replace the lost in income from the compulsory acquisitions. We maintain BUY on CIT with an unchanged DDM-based (COE: 9.8%, terminal growth: 1.0%) TP of S$0.660.